Pro-competitive Industrial Policy

The relationship between industrial policy and competition policy is complex since the interaction between both policies may be complementary, neutral or in conflict with each other. The way in which both policies interact depends both on their underlying objectives as well as on the way in which both policies are designed and implemented.

In June 2024, the OECD held a roundtable to discuss the interplay between industrial and competition policy and explore the potential role of competition authorities in the design, development and/or implementation of industrial policy. The roundtable discussed whether or when the goals of competition policy and industrial policy are consistent and what principles can be followed to ensure pro-competitive industrial policy. Moreover, we explored the potential role for competition authorities and what other courses of action can support a pro-competitive design or implementation of industrial policy.

The discussion revealed that although by no means a new phenomenon, industrial policy has undergone some changes in recent years, including: 

• the appetite for many governments to use it, at least explicitly,
• the objectives that governments aim to achieve with it and
• the way in which it is deployed and researched.
• The discussion also noted that governments and competition authorities have found different ways to insert competition considerations in designing industrial policy. However, continued co-ordination between a range of different government institutions – including competition authorities – is key to make industrial policy effective and minimise market distortions.

Industrial policy is complex and good policy design of policy instruments is key. An important role to make industrial policy pro-competitive can be played by “conditionalities”, which provide obligations on recipients of government support to ensure certain behaviour and performance, and “guardrails”, which condition public support on limiting extractive corporate behaviour in order to prevent firms from prioritising shareholder value over investing in true innovation.

Finally, competition principles should be a cornerstone of carefully designed industrial policy measures, and in this sense, competition authorities can have an important role to play in designing industrial policy to ensure competition-friendly industrial policies.

OECD Background note | Note de référence de l'OCDE

The Contribution of Competition Agencies to Formulating Industrial Policy – Note by William Kovacic